Fragmentation and multinational production

Research output: Contribution to journalArticleResearchpeer-review

103 Citations (Scopus)


This paper examines the consequences of falling transport costs for intermediate goods, and shows how this leads to the spatial fragmentation of production. As firms divide their production between countries they become either vertical multinationals (if upstream activities are labour intensive) or horizontal multinationals (if downstream activities are labour intensive). In the former case the volume of world trade increases, and in the latter it falls. Fragmentation need not narrow international factor price differences, which depend on the factor intensity of the activities that relocate.

Original languageEnglish
Pages (from-to)935-945
Number of pages11
JournalEuropean Economic Review
Issue number4-6
Publication statusPublished - Apr 1999
Externally publishedYes


  • Fragmentation
  • Globalization
  • Multinational firm

Cite this